Kaiko Research: Bitcoin and Ethereum Are Now Less Volatile Than Oil Amid Dwindling Liquidity

Bitcoin (BTC) and Ethereum (ETH) are now slightly less volatile than oil as both assets continue to trade sideways this summer.

According to new research from Kaiko, the notorious trend of cryptocurrency volatility has taken a sharp decline due to several factors ranging from government policies to wider macroeconomic factors.

The slowed volatility change in the top two digital assets has now seen it drop to “multi-year lows, slightly below oil prices.” 

Bitcoin’s 90-day volatility index stands at 35% while Ethereum is slightly higher at 37%. The global oil price 90-day volatility index sits at 41% creating a new trend described by Dessialava Ianeva, a lead analyst at Kaiko as “unusual.” 

Historically BTC and ETH have remained more volatile than oil and other assets although the trend in the last three months shows the asset hovering around the $30,000 mark.

Known for its volatility, last year BTC and ETH lost over 55% of their market values following a rocky patch in the woods for the entire ecosystem. 

As this year marks new beginnings, the price of BTC has surged 80% year to date (YTD) recording another huge leap in volatility. 

Per the research, oil tops multiple assets evaluated by Kaiko from crypto, gold, and tech-driven Nasdaq. Even so, the volatility index of oil has fallen in the past twelve months as it stood at 63% in July 2022. 

Market volatility is the degree or frequency of change in the price of an asset over a period of time. Risky assets are often characterized by high volatility as they swing faster, opening investors to higher risks.

Wider macroeconomic factors and market trends

Analysts at Kaiko cite the geopolitical tension characterized by Russia’s invasion of Ukraine leading to global sanctions and China’s poor reopening after economic gripping Covid measures. 

Ianeva also stated that Bitcoin’s volatility reduced as “the asset continues to mature.” As more adoption trickles into the market, it becomes less volatile compared to its formative years.

Finally, the research highlighted liquidity as another on-chain factor behind the drop in volatility. Ianeva explained that for the past few months, leading assets like BTC, ETC have recorded lows in terms of trade volumes and liquidity. 

With the recent regulatory crusade in the US market, investors have become a little skeptical of the direction of the Securities and Exchange Commission (SEC) in approving a spot BTC ETF. 

On the bright side, the approval of a spot ETF though months away, could turn the tide pushing the price of BTC and the general market capitalization to new highs.